Look before you leap

More and more investors are trading in the stock markets than ever before. As there are risks associated with this, it is imperative for investors to follow some 'Do's and Don'ts' while participating on bourses, states a Bombay Stock Exchange investor initiative. Extracts

Do's

Always deal with the market intermediaries registered with Sebi/exchanges.

Give clear and unambiguous instructions to your broker/ agent/ depository participant.

Insist on contract notes from your broker. In case of doubt of the transactions, verify the genuineness of the same on the exchange website.

Always settle the dues through the normal banking channels with the market intermediaries.

Before placing an order with the market intermediaries, check the companies' credentials, managements, fundamentals and recent announcements and various other disclosures made under various 'Regulations'. Sources of these information are the websites of exchanges and companies, databases of data vendors, business magazines etc.

Adopt trading/ investment strategies commensurate with your risk-bearing capacity as all investments carry risks, and their degree varies in accordance with the investment strategy adopted.

Carry out due diligence before registering as client with any intermediary.

Carefully read and understand the contents stated in the 'risk disclosure document' that forms part of investor registration requirement for dealing in the stock market through brokers.

Be cautious about stocks that show a sudden spurt in price or trading activity, especially low-price ones.

Don'ts

Avoid dealing with unregistered brokers/ sub-brokers, and intermediaries.

Skip trading based on rumours generally called 'tips'.

Don't fall prey to promises of guaranteed returns.

Avoid approvals/ registrations (shown by companies) from the government agencies as approvals, as they could well be for other interests rather than the securities you are buying.

Don't let any intermediary take custody of your demat transaction slip book.

Ads appearing in print and electronic media promoting the financial performance of companies need not be always correct.

Media reports on corporate developments could be mis-informed or misleading.

Don't blindly imitate investment decisions of others who might have profited from their decisions.

Lastly, for the benefit of investors, the BSE has installed a toll-free line 1600 22 6663, through which you can inform on any specific lead with regard to any type of undesirable trading practice in any scrip or any type of market aberration that you observed.

But to whatever extent one may trade in shares, remember there are no guaranteed returns on your investments in the stock market.